While they were once seen as flights of fancy for the very rich or simply laughed off as a fad, cryptocurrency is here to stay and in a big way too. But the question of regulation is a bit of a double-edged sword. Because while on one hand, you have those claiming crypto is being used for illicit financing and regulation could help stamp that out, on the other you have those claiming the main reason crypto is so enticing is because of its unregulated nature. So who is right here? Let’s investigate by putting the biggest cryptocurrency of them all (bitcoin) under the spotlight.
Riding the market
The value of bitcoin is invariably going to be linked to how it’s being regulated. As a case in point, the currency sank to an all-time low at the end of 2019 when China started cracking down on crypto business. These are currencies not beholden to the rules and borders of countries or governments and that’s what makes them both so exciting and so dangerous.
Who should be regulating bitcoin?
There has always been (and perhaps always will be) confusion around who should actually be doing the regulating. This confusion was certainly not helped by former President Donald Trump’s tax reform law, which led to greater confusion over whether crypto should be treated as a commodity or property. It’s a very technical regulation problem with no one clear answer. In the US, there are also different laws from state to state and globally it’s even more complex. So, is regulating bitcoin more trouble than it’s worth?
How it should (or could) be done
It’s all got to be down to the International Monetary Fund (IMF). This is an international agency that has been calling for global discussion and cooperation about crypto for years now. The EU right actually be at an advantage here, as it controls the regulations for an entire block, rather than individual countries. In fact, the EU could set a pretty powerful precedent if it was so inclined.
In the US, meanwhile, there would need to be agreements across states to create a uniform law across borders. The Uniform Law Commissions attempted to formulate such an agreement last year but so far the law has only been introduced in four states.
What does it mean for investors?
Ultimately, until there is some form of cohesive regulation, bitcoin is always going to be a volatile currency for investors. But surely that’s half the fun of it? So, if you’re a forex trader looking to diversify your portfolio or have simply been fascinated by the rise of bitcoin over the last decade, it’s definitely not a boring investment. Whether it will bring you any joy, on the other hand, is up for debate.